New and existing customers could have to pay up to £150 – instead of the previous £25 – should become unintentionally damaged, lost or stolen.

Customers will also not be issued with a like-for-like new phone, but a reconditioned replacement.

Money saving and mobile phone comparison website, moneymaxim.co.uk, has received a number of complaints from existing O2 customers who are facing sudden changes to their iPhone contracts, coming into effect on September 30.

The launch of the higher value iPhone4 has lead to the sharp increase in insurance prices; however, the steep jump from an excess of £25 to £100 if a third claim is made, is not in keeping with other network providers.

Managing Director of moneymaxim.co.uk, Mark Bower, said: "The severity of the changes is surprising, and given the rates charged by other companies in the market, these policies look particularly poor in value."

Letters informing existing O2 customers of the impending changes in excess prices claim that the company is acting in the interest of preserving the £15 a month premium, which remains unchanged. One letter reads, "We've taken this approach so we don't have to increase your monthly premium."

Although O2 is no longer the sole distributor of the iPhone, it retains the largest share of the market in the UK – sales surpassed 2 million by February this year of an estimated total of 2.5 million. The smartphone is also available on Vodafone and Orange with both network providers offering much more competitive insurance cover.

Unlike O2's specific rates for the iPhone. Vodafone charges its customers £15 for the first successful claim and £25 for the second, while Orange has a flat rate of £15 to replace handsets in the event of accidental damage, theft or loss.

Monthly premiums of £6.99 and £6 respectively apply to all handset makes and models.

Mr Bower urges anyone paying more than £7 a month for mobile insurance to shop around for cheaper alternatives.

But many O2 customers have opted to cancel their policies all together, finding it more economical to buy a new handset from Apple directly, should they damage or lose their iPhone.

iPhone user ashproctor wrote on an O2 chat forum: "Suffice to say I have now cancelled the policy. If anything happens to my phone, at least I can get an out of warranty replacement for £146 from the Apple Store, which works out cheaper as I'm now not paying a monthly premium."

Get a quote for mobile phone insurance in minutes from Telegraph Money, or call 0844 375 9639. Cover starts from £3.99 per month.